In Renewable Transportation, US and China Each Have Competitive Advantages

In the race to get off of imported oil, a new report says China may win, at least if the end goal is using more electric vehicles (EVs). The U.S. will transition to EVs much more gradually, say the Accenture report’s authors. However, the heavy emphasis that the U.S. places on innovation may lead the country to develop more disruptive technological breakthroughs in advanced combustion engines, biofuels and electric vehicles.

Accenture’s new report, “The United States and China: The Race to Disruptive Transport Technologies,” concludes that China’s state-backed focus on electric vehicles (EVs), its domestic supplies of lithium and current battery production capability will give it a competitive advantage over the U.S. in EVs.  China will deploy new transport technologies at scale more quickly than the United States, but the U.S. could lead a global biotechnology-based agricultural revolution that will generate a greater range of biofuel breakthroughs.

“The US already has a competitive advantage in agriculture and conditions that make it the home of completely new technologies, but China’s policy decisiveness will allow it to scale specific new transport technologies more rapidly,” said Melissa Stark, global lead of the Clean Energy Practice at Accenture.

The rise of new fuel technologies and greater fuel efficiency will give both countries greater energy independence, says the report. The reduction in gasoline demand in the U.S. could be up to 22 billion gallons per year by 2030 if vehicle miles travelled (VMT) remained roughly the same as today, according to an Accenture scenario analysis. This could cut crude oil imports by 1 billion barrels per year, a 34 percent reduction from the 3.3 billion barrels imported in 2009.

China, which imports over half its petroleum demand, could reduce its crude oil imports by 676 million barrels per year by 2020, a drop of 21 percent from today.

Stark sees the drop in imported oil as positive steps towards energy independence for both countries but cautions policymakers and investors that each country still has significant challenges ahead, “Both countries will need to put in place major structural changes to ensure their industries adapt and can compete globally,” she said.

Hydrocarbon Winners and Losers

The rise of new fuels will have a negative impact on the U.S. refining industry. Increased fuel efficiency standards and the blending of biofuels could replace more than 30 percent of US gasoline and diesel demand by 2030 relative to 2010 if VMT stayed the same.

The reduction in gasoline demand will impact U.S. refineries currently configured to maximize gasoline production and favor those refineries that can more easily adjust their product mix. “The U.S. has to manage the transition of its legacy infrastructure to one that will accommodate new fuels to ensure that this transition occurs at the lowest possible investment cost,” said Stark.

But in China there will be no losers, according to the report. Even though China intends for renewable energy to make up 30 percent of transport fuels by 2020, Accenture estimates that car ownership will almost triple between now and 2020 to approximately 200 million, creating growth for the biofuel, EV and oil industries.

 “The US does not have a blank piece of paper while China, in many ways, does. China’s challenge is to balance implementation with innovation if it is to compete well in the long-term race for new transport technologies. Both countries need to leverage their respective advantages.”

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